Question ID
2015_2303
Legal act
Regulation (EU) No 575/2013 (CRR)
Topic
Liquidity risk
Article
421, 460
COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations
Delegated Regulation (EU) 2015/61 - DR with regard to liquidity coverage requirement
Article/Paragraph
Art. 25 paragraph 2 letter (c) point (i)
Type of submitter
Credit institution
Subject matter
Definition of retail deposits with higher outflow rate
Question

What is the definition of the condition for retail deposit with higher outflow rate: "the rate significantly exceeds the average rate for similar retail products"? Bucketing our retail deposits we have a two-fold problem with defining when deposit rate on our product significantly exceeds or does not exceed the average rate for similar retail product.

Background on the question

I) Our institution usually offers deposit rates that are above average deposit rates offered by our local competitors, but we do not consider this spread as significant. Is there any specification, or even simplification, when deposit rate should be considered as significantly exceeding average rate for similar retail products?
II) What if institution offers deposit product that has unique characteristics and no peer group products in the local market. Should all deposits within this product be automatically considered as deposits with rates significantly exceeding average rate?

Submission date
Final publishing date
Final answer

A methodology for the identification of retail deposits subject to higher outflow rates is described in Article 25 of the Delegated Regulation (EU) 2015/61.

In this regard an institution should look at similar products in other institutions with comparable business model and size in its local deposit market and assess whether or not it applies significant higher return than its peers do on average. This assessment should be conducted by the institution itself and verified by the competent authority if necessary.

The condition in Article 25(2)(c)(i) of the Delegated Regulation (EU) 2015/61 should not be considered to be met where an institution offers a deposit product which is not similar to any other in the market since the deposit cannot strictly be considered to be rate-driven in the context of such provision. Again the cited verification by competent authority applies if necessary.

 

Note: This Q&A (originally published on 13 May 2016) has been amended on 27 April 2018 to reflect that Guidelines on retail deposits subject to different outflows for purposes of liquidity reporting under Regulation (EU) No 575/2013 were repealed.

Previous answer:

A methodology for the identification of retail deposits subject to higher outflow rates is described in the Delegated Regulation (EU) 2015/61. Further explanation of the risk factors listed there and considered for such identification can be found in the EBA Guidelines EBA/GL/2013/01 on retail deposits subject to different outflows for purposes of liquidity reporting under Regulation (EU) No 575/2013, on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012 (Capital Requirements Regulation 13 CRR).

In this regard an institution should look at similar products in other institutions with comparable business model and size in its local deposit market and assess whether or not it applies significant higher return than its peers do on average. This assessment should be conducted by the institution itself and verified by the competent authority if necessary.

The risk factor envisaged in Article 25(2)(c)(i) of the Delegated Regulation (EU) 2015/61 should not be considered to be met where an institution offers a deposit product which is not similar to any other in the market since the deposit cannot strictly be considered to be rate-driven in the context of such provision. Again the cited verification by competent authority applies if necessary.

Status
Final Q&A
Answer prepared by
Answer prepared by the EBA.
Note to Q&A

Update 26.03.2021: This Q&A has been reviewed in the light of the changes introduced to Regulation (EU) No 575/2013 (CRR) and continues to be relevant.

Disclaimer

The Q&A refers to the provisions in force on the day of their publication. The EBA does not systematically review published Q&As following the amendment of legislative acts. Users of the Q&A tool should therefore check the date of publication of the Q&A and whether the provisions referred to in the answer remain the same.